The relationship between supply and demand for a particular type of multifamily property at its current rental level is reflected by

• A. Cap rate
• B. Vacancy rate
• C. Occupancy rate for that type of property
• D. Rent per unit

Answer: (C)

The key idea is measuring how the market is balancing supply and demand for a specific type of multifamily property at the current rent. The occupancy rate for that type of property shows what portion of those units are actually leased, which directly reflects how strong demand is at the going rent relative to the available supply. If occupancy is high, most units are rented, indicating demand is keeping up with or exceeding supply at that rent. If occupancy is lower, demand at that rent isn’t keeping pace, signaling a looser market or oversupply for that property type.

Cap rate focuses on the investment return (NOI relative to price) and doesn’t directly indicate the supply-demand balance at the current rent. Vacancy rate is related but less direct about the ongoing balance at the current rent level; occupancy communicates how much of the market is being absorbed right now. Rent per unit shows price level, not the market’s balance between supply and demand.